DSCR rental loans are investment property mortgages that qualify borrowers based on the rental income potential of the property rather than the borrower’s personal income. Traditional investment property loans require extensive documentation of this information, including tax returns, W-2s, pay stubs, and employment verification. Lenders analyze debt-to-income ratios and scrutinize every aspect of the borrower’s financial life. However, with a DSCR loan for rental property, it’s often much easier to get approved.
We streamline the process by focusing primarily on the property’s income-generating potential. While we still verify assets and credit scores, we don’t require tax returns or employment documentation. This approach benefits self-employed individuals, business owners, and investors whose personal income might not reflect their true financial capacity. See for yourself how our DSCR rental loans can make your life easier!
DSCR Rental Loan Features and Terms
| Feature | DSCR Rental Loans |
|---|---|
| Loan Type | Real estate-secured loan |
| Income Documentation | Based on rental income of property only; NO DSCR available as well |
| Lien Position | 1st or 2nd Position |
| Loan Term | 10-30 years |
| Interest Rates | Fixed and Adjustable Rates Available Starting In The 6% Range |
| Loan Amount | $100,000 – $5,000,000 |
| LTV | Up to 80%; DSCR Ratio of 0 to 1; Only 3 months seasoning for cash out |
| Credit Score | 600 min |
| Occupancy | Investment properties nationwide |
| Property Types Allowed | 1-4 unit residential, multifamily |
| Prepayment Penalty | Flexible |
| Closing Time | 14-30 days |
What is a DSCR Rental Loan?
Rental Loans, sometimes referred to as DSCR, or Debt Service Coverage Ratio Loans, are specifically designed to finance the purchase or refinance of rental properties. These loans cater specifically to real estate investors who intend to generate income from their properties. DSCR Rental Loans can also be used for cash-out refinancing, allowing investors to leverage the equity in their properties.
DSCR Rental Loan Features and Benefits
Debt Service Coverage Ratio (DSCR): DSCR is a critical metric used in rental loans to assess the property’s ability to cover its debt obligations. It is calculated by dividing the property’s net operating income (NOI) by its total debt service. A DSCR greater than 1 indicates that the property generates sufficient income to cover its mortgage payments, making it a vital factor for qualifying for a rental loan. This allows investors to qualify based on the property’s cash flow rather than personal income.
Competitive Interest Rates: Our Rental Loans come with competitive interest rates, ensuring affordable and manageable monthly payments.
Flexible Terms: These loans offer flexible terms, allowing borrowers to choose repayment schedules that fit their financial plans.
High Loan-to-Value Ratios: Borrowers can benefit from high LTV ratios, ensuring substantial financing for property purchases or refinancing.
Cash-Out Refinancing: Investors can leverage the equity in their rental properties for other investments or personal use.
Streamlined Approval Process: Our streamlined approval process ensures quick funding, enabling investors to seize market opportunities.
Who Would Benefit from a DSCR Rental Loan?
Real Estate Investors: Investors looking to purchase or refinance rental properties can use rental loans to finance their investments. These loans allow them to leverage the property’s rental income for qualification, ensuring steady cash flow.
Small Business Owners: Business owners investing in commercial rental properties can benefit from rental loans to expand their real estate portfolios. This generates passive income and diversifies their investment strategy.
Self-Employed Borrowers: Self-employed individuals investing in rental properties can use rental loans to finance their purchases. The rental income helps to qualify for the loan, providing financial flexibility and growth opportunities.
DSCR Rental Loan Example
Carlos and Maria, seasoned real estate investors, wanted to refinance their multi-family rental property in San Diego to leverage its equity for further investments. They approached Westpark Loans for a Rental Loan.
Property Details:
- Location: San Diego, California
- Property Value: $1,200,000
- Current Mortgage: $600,000
Loan Details:
- Loan Amount: $900,000 (75% LTV)
- Loan Term: 15 years
- Interest Rate: Fixed
- LTV: 75%
Westpark Loans approved the Rental Loan in 30 days, allowing Carlos and Maria to refinance their property and use the cash-out for additional real estate investments.
Frequently Asked Questions
Yes, rental loans are designed for purchasing and refinancing rental properties.
Eligible properties include single-family homes, multi-family units, and apartment buildings.
Rental loans typically have terms ranging from 5 to 30 years.
Yes, rental loans can be used for both long-term and short-term rental properties.
Yes, the minimum credit score requirement varies by lender but generally starts at 620
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